shortOn Monday, CR had this SS post and graph on the increase in short sales. The information used was part of a package that included a national audio conference held that day about short sales, and the upcoming HAFA, which begins April 5th.

There were three speakers, from Bank of America, Wells Fargo Bank, and Freddie Mac, who discussed what they are doing about making short sales more palatable.

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bankofAmericaBank of America rolled out their new short sale phone number, 866-880-1232, and mentioned that agents can now use their REO-processing website  for short sales.  The presentation was a little light on details, but I can report a recent success.  

We submitted a short sale on behalf of our seller that only took six weeks to get an approval (and the notice came over on a Sunday, from Plano, Texas).

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Wells_Fargo_logoWells Fargo Bank announced that they are placing short-sale managers in the field.  They will be interviewing the sellers on-site, going to their houses to determine their eligibility, and collecting the necessary financial documents.  Once in process they’ll order an appraisal, and have a response in 7-10 business days.

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I think the banks are too optimistic about the sellers’ willingness to cooperate, after training them to crave the free cheese.  WFB is giving $5,000 cash-for-keys to the sellers, but they need to threaten them with foreclosure if we’re going to see any real movement.

Both banks promised to pick up the pace – if they could close short sales within 60 days, it would be a big improvement.  To keep the sales urgency higher, the banks have to move quicker to determine the acceptable price of the properties – buyers would be more willing to wait out the process if they knew their price was approved. 

It’s hard to believe that the servicers will push to pre-approve any short-sale prices, or especially in the volumes necessary to make a difference.  Pre-approvals are, in effect, a voluntary principal reduction, and servicers aren’t going to be rushing those out.  Will they approve a fully-packaged short sale in 2-6 weeks?  It’s possible, and getting an accurate valuation quickly is the key.

Other hurdles: 

  • The junior lienholders have to agree to lose money too.
  • In the Q&A, it was asked if there are going to be deficiency judgments, or are the sellers off the hook.  Freddie Mac confirmed that sellers in HAFA are released from liability, but the representatives from Bank of America and WFB were conspicuously silent.
  • Sellers are still subject to deficiency judgements from junior lienholders, and liable for income tax on capital gains.
  • For possession and occupancy to be delivered to the buyers, the sellers have to get out of the house.  But they are addicted to the free rent, plus their credit report will reflect 6 to 18 months of late payments on their mortgages.
  • Once the short sale is approved, the buyers then conduct their physical inspection.  Any required repairs fall on the realtor to resolve – expect many potential short sales to fail at this juncture due to inexperience/ineffectiveness. 
  • The rampant fraud being committed by realtors is a turn-off.

The housing bailouts have a history of not benefiting the masses.  For short sales to increase significantly, the lenders would have to commit to losing big money, and lately there has been reluctance and feet-dragging.

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Jim the Realtor
Jim is a long-time local realtor who comments daily here on his blog, bubbleinfo.com which began in September, 2005. Stick around!

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